QuidelOrtho (QDEL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Q3 2024 revenue was $727 million, with adjusted EBITDA of$ 171 million and adjusted diluted EPS of $0.85 [8] - Total year-to-date revenue was$ 2.1 billion, with recurring revenue of $1.74 billion, representing 5% growth compared to the prior year period [19] - Adjusted EBITDA margin improved by 80 basis points year-over-year to 23.5% in Q3 2024 [30] - The company expects full-year 2024 revenue between$ 2.75 billion and $2.80 billion, with adjusted EBITDA between$ 530 million and $550 million [34] Business Line Performance - Labs business grew 5% year-over-year in Q3 2024, driven by integrated and automated analyzers, which grew 7% and 17% respectively [24] - Transfusion Medicine revenue grew 3%, while donor screening declined by 20% as expected [25] - Respiratory revenue declined by 11% year-over-year in Q3 2024, primarily due to higher COVID-19 and flu revenue in the prior year period [26] Regional Performance - EMEA grew 12% in Q3 2024, while the Asia-Pacific and Latin America region grew 8% [20] - North America declined by mid-single digits due to higher respiratory revenue in the prior year period and the wind-down of the U.S. Donor Screening business [20] - China revenue declined by 1% year-over-year, with Labs business growing 5% but offset by softness in Transfusion Medicine and cardiac point-of-care products [21] Strategic Direction and Industry Competition - The company is focusing on cost and process improvement initiatives in procurement, supply chain, manufacturing, quality, and IT to improve profitability [14] - The Savanna molecular platform is a key driver of future revenue growth, with plans to enter clinical trials for the respiratory panel in 2025 [13] - The company is aligning its leadership structure to be flatter and more agile, with global regions fully aligned with business units [11] Management Commentary on Operating Environment and Future Outlook - The company expects to realize$ 100 million in annualized cost savings by the first half of 2025 [8] - Management is optimistic about the path ahead, with a focus on improving profitability and growth through cost savings and business efficiency initiatives [41] - The company is closely monitoring value-based pricing initiatives and China's anti-corruption policies, which could impact future sales [22][23] Other Important Information - The company finished Q3 2024 with $144 million in cash and$ 230 million in borrowings on its $800 million revolver [31] - Adjusted free cash flow in Q3 2024 was$ 120 million, representing 70% of adjusted EBITDA [32] - The company expects to exit the U.S. Donor Screening business by the end of 2025, which will provide a tailwind to margins [81] Q&A Session Summary Question: 2025 Adjusted EBITDA Margin Target - The company expects 100-200 basis points of margin improvement in 2025, driven by $50 million in cost savings and additional initiatives in procurement, IT, and organizational restructuring [44][45] Question: Labs Business Visibility - The Labs business has strong visibility due to long-term contracts and predictable ordering patterns, with mid-single-digit growth expected in 2025 [48] Question: Respiratory Season and COVID-19 Revenue - The company expects$ 160- $170 million in COVID-19 revenue for 2024, with$ 20-$30 million in Q4, and is being cautious about timing due to potential revenue shifts into Q1 2025 [51][52] Question: China Cardiac Reimbursement Impact - Proposed reimbursement changes for cardiac biomarkers in China could impact 1% or less of 2025 revenue, with no significant impact expected from value-based pricing initiatives [55][63] Question: Organizational Changes - The company is flattening its organizational structure to improve efficiency and customer focus, with no expected disruption to the sales team or customer interface [59][60] Question: Savanna Platform Update - The Savanna platform is on track for clinical trials in 2025, with significant revenue impact expected in 2026 and 2027 [66] Question: Cross-Selling Efforts - The company is focusing on increasing cross-selling of legacy Quidel products, particularly in international markets, with a shift toward direct sales channels [74] Question: China Stimulus Impact - The company is monitoring the potential impact of China's economic stimulus but sees it as a potential tailwind, though it is too early to quantify [77] Question: Equipment Replacement Cycle - The company has long contract cycles and high retention rates, supporting stable mid-single-digit growth in its Labs business [78] Question: Respiratory Competitive Landscape - The company is the leader in the respiratory space and expects to maintain similar market share to 2023, with efforts to increase share in the current season [84][85]